Five Questions For Hank Levine, Ellen Block, Colleen Boothby, and Jim Blaszak
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Metro Legal Times (February 24, 2003)

Levine, Blaszak, Block & Boothby is a 16-lawyer boutique specializing in the representation of large users of telecom and network-related services. LB3 was founded 10 years ago in the District by three lawyers from the D.C. office of Morrison & Foerster-Henry Levine, Ellen Block, and Debra Lagapa (since retired). They were soon joined by Colleen Boothby and James Blaszak.

Levine and Block specialize in the representation of large telecommunications users in purchase of services and in disputes with carriers. Boothby heads the firm's regulatory practice, representing large telecommunications users and providers of information technology products and services before the Federal Communications Commission. Blaszak splits his time between regulatory work and transactions.

Why did you decide to start your own practice?
LB3 has several founders, and each gives a slightly different answer to that questions. What the answers have in common is that when each of us joined the firm she or he had an itch to leave the big firm (or, in one case, the government agency) where she or he was, and joining LB3 seemed like a good way to scratch it.

Hank Levine was the founder and head of MoFo's communications practice group and a member of the firm's policy committee, but he was also nervous about conflicts (when major carriers approached MoFo for real estate or labor work the firm had to turn them away, which understandably bothered the affected partners). Restless with the bureaucracy of a 600 lawyer international entity, Levine was eager to try his hand at building a different kind of firm. Ellen Block and Meghean Field (LB3's administrator since its birth) shared that dream.

Colleen Boothby joined the firm late in 1993 after a brief stint at a large firm followed by a decade with the Federal Communications Commission. She wanted to return to private practice, but in a nontraditional environment. Excited about the prospect of developing a sophisticated regulatory practice not built on representing telephone companies, she was also drawn to the quality of the firm's lawyers and clients.

Jim Blaszak came to LB3 in 1995. He had been a partner at several firms from the late '70's through the early '90's-for a while he and Levine were competitors, running two "large user" telecom practices. He tried to recruit Levine for a decade, but tables turned at the right time-by the mid '90's Blaszak was disillusioned with the culture of large firms and increasingly troubled by conflicts. The chance to be a wheel instead of a cog and to avoid conflicts with colleagues representing major carriers was one he could not pass up.

Tell us about your clients: Who are your top clients now?
LB3 focuses single-mindedly on the representation of large users of telecom and network-related services-our principal competition is not other firms but in-house counsel (who are also a major source of referrals, especially when a deal has gone astray). As a result, our active clients include more than 40 of the Fortune 100. In the automotive world, we represent GM, Ford, and DaimlerChrysler. Media and publishing clients include the Washington Post, Bertelsmann, QVC, and Thompson. Hospitality clients include Marriott, Hyatt, Hilton, and Starwood. In financial services, our clients include Visa, Merrill Lynch, Morgan Stanley, UBS, Goldman Sachs, Bear Stearns, Lehman Brothers, the Securities Industry Association, and Washington Mutual. The insurance companies we represent include Prudential, Aetna, and the Hartford. Outsourcing/IT clients include IBM, Lockheed-Martin, EDS and Perot Systems. ChevronTexaco, Dupont, Honeywell, Federated Department Stores, Marathon Oil, and United Airlines are also on the list. And although they aren't among our largest clients, we also represent some of the largest law and consulting firms in telecom matters, which is a nice compliment. No single client accounts for more than 8 percent of our revenues.

Paradoxically, the only sector of the economy in which we don't have a lot of clients is telecommunications-we represent some smaller carriers in their dealings with the major carriers, but do not represent any of the leading providers.

Business Development: Where do you find new clients?
Most of our clients come to us by word of mouth-large user telecom managers form a small and mobile community. We've done work for many of these folks over the years, and when they change companies or are asked for a recommendation, our name frequently comes to mind.

We've also worked with and for some of the major consulting firms, and they recommend us when a project is outside of their expertise but within ours. We even get business from the carriers (when they have a potential customer that has a troubled contract with one of their rivals) and their counsel (who are conflicted out when a large user has a problem with a carrier client).

That said, we do a lot of things to keep our name in front of the users who are (or could be) clients. We write articles for publications like Business Communications Review, Network World, and the Voice Report, which our clients read. And because of our representation of corporate users in telecom matters, we get quoted not only in the telecom trade press, but also in The Wall Street Journal, USA Today, and on PBS's "Nightly Business Report."

We also speak often at seminars and conferences. Twice each year we chair a CCMI-sponsored conference on Negotiating Telecommunications Agreements. The conference has been held every spring and fall for a decade, and attracts a lot of end users and consultants. Many of them have become clients.

We've never done any formal marketing or advertising, although we are working now with a marketing firm on creating a logo and a common "look and feel" across our letterhead, literature, Web site, and presentations.

Talk about metrics: How do you measure business success?
One of the concerns that led to the founding of LB3 was the belief that large law firms were becoming too focused on hours, "leverage", "originations," and the like. We've done a pretty good job over the last decade of succeeding both financially and as a place to work, and while we don't ignore the numbers-we track revenues and expenses pretty carefully-we don't obsess about the numbers.

Carl Leonard, who was the chairman of MoFo when Levine was there, used to say that the Four Horsemen of the Law Firm Financial Apocalypse are rates, hours, leverage (associates per partner), and expenses. We're OK on rates-our goal is to be in the neighborhood of the major Washington-based firms. But they are much more aggressive about raising fees, and as a result, we're at the low end. (Oddly enough, the clients don't seem to mind.) Our target is 1,700 to 1,800 billable hours per lawyer, which is pretty modest in this day and age, and most of the lawyers in the firm meet it most of the time. We diverge sharply from the large firms in terms of leverage; we are currently 11 partners and five associates. We don't hire first-years; the people who come here three to five years out of law school are likely to make partner; and we don't disappoint many of them, as our upside-down pyramid structure shows.

Even with moderate rates, low hours, and no leverage, we're pretty successful economically-per partner income is about in the middle of the AmLaw 200. How do we do it? First, we are really good at expense management. We offer "big firm" salaries and benefits, but our space, though nice, isn't plush, and there are no "three window" offices. Most national firms have as many employees not billing time as they have lawyers and paralegals who do bill time, but having no secretaries or clerks (we use part-time college students to file and copy, and everyone takes a turn at kitchen duty) means that of LB3's 24 full-time personnel, 18 bill their time. We also have virtually no debt, which means no interest expense.

Second, on the revenue side, our client base and lack of junior associates means few write-downs or write-offs. We've enhanced revenues by supplementing billed-hours work (still 90 percent of our practice) with selective contingent claims on behalf of large users.

LB3 also has a consulting affiliate-TechCaliber Consulting (TC2 of course) - with a complementary practice and client base. In the three years since its founding, TC2 has grown to 10 consultants in the United States and the United Kingdom. LB3 does "Word"- contract negotiation and drafting, carrier-customer disputes, and regulatory matters. TC2 does "Excel"-benchmarking, pricing, and financial analysis, and billing/compliance audits. Its success also helps our bottom line.

Finally, we're smart enough to know that the reason we don't obsess about the numbers is that we haven't had to. Our business has grown virtually every year, including in 2002 when telecom practices built on representing carriers (which is to say almost every telecom practice) suffered in the wake of the industry crash. Our collegiality and values-and particularly our belief that if you do really good work and take care of your people the money will take care of itself-will not be tested until we have a bad year.

In the decade since you started the firm, what are the biggest surprises you've encountered?
The biggest surprises have been good ones. One was the willingness of the world's largest companies to trust their network-related legal work to a boutique. General counsel often talk about their interest in finding and using the best lawyers for a particular problem, even if that means looking beyond the largest firms, and if our experience is any guide it isn't just talk. Even when we were just starting out we were surprised by how rarely a GC or CFO who had never heard of us would demand that Skadden or Wilmer or Latham or V&E or MoFo be brought in. Indeed, our international work has grown to the point where TC2 has two people in London and LB3 is seriously considering a London office.

Another (good) surprise has been the inability of the major firms to move into our niche successfully. That's related to a fact that surprises our friends and colleagues but not us-namely that we are still independent after a decade, and haven't been swallowed up by a large firm. We get approached by a lot of big firms who like our client list and want to add telecom or technology expertise. It turns out that we're easy to date but hard to marry, for reasons that boil down to leverage and conflicts. Large law firms like practices and projects that work with two or three associates per partner. But the specialized nature of what we do and the expertise required to do it requires a lot of experienced people who understand the technical, economic, and regulatory forces that shape telecom, which stunts leverage. And when big firms think "telecom" they are thinking about attracting or growing clients like BellSouth or Verizon or AT&T-precisely the companies we can't and don't represent. The bottom line is that the big firms can't digest us and don't really want to compete with us, both of which suit us just fine.

The biggest bad surprise that we've faced has been that after a decade, our clients are still being presented with one-sided "standard" contracts that excuse the carrier's (but not the customer's) performance for force majeure events; limit the carrier's (but not the customer's) liability; give the carrier two years and the customer a month to find and correct billing errors; permit the carrier to cut off service without notice, etc. One quick story captures the point.

Eight years ago we noticed that according to one large carrier's form, a customer that did not meet its purchase commitment was required to pay shortfall charges that exceeded the unmet commitment. We noted the problem and the fact that the clause as written was not just overreaching but probably illegal. The carrier changed the term in the deal before us and promised to fix the problem. Eight years, dozens of forms, and scores of pointed conversations later, the problematic language still appears in the carrier's "standard" form. And it isn't just contracts-in the regulatory world, we regularly see proposals that completely overlook (or are inimical to) the interests of customers.

Finally, although we hate to admit it, we're sometimes suprised by how well the model on which the firm was founded has held up. It wasn't clear in 1993 that a boutique with a collegial, informal environment that forswore leverage, punishing hours, or New York rates could produce economic returns comparable to those of a large firm. We've done it so far by holding costs (other than salaries and benefits) to levels that are half those of the large firms, and being fortunate enough to collect virtually all of our billed time. Along the way we've had more than our share of fun and attracted very good people-the law schools represented at LB3 include Boalt Hall, Chicago, Harvard, Michigan, and Texas; our largest "delegations" are from the University of Virginia and Georgetown.

And we like who we are-a rainbow coalition about half of whose lawyers are women, including two of the four name partners, and three with young children who work less than full time. Our distinctive culture and outlook-no secretaries, partners' offices, or neckties; attorneys hours per year; associates who mostly become partners; at least two PCs per lawyer; and good coffee-suits us.

If the model holds up for another 10 years we'll all be very pleased. Some of us won't even be surprised.